Canberra should get tougher on corporate tax avoidance

IT is strange that the Australian government has decided that it won't go after tax-avoiding multinational corporations (MNCs) after all.

Despite brave words before the G-20 summit - when the practice of profit-shifting was likened to "theft", no less - Canberra has decided that it would not close a loophole that was introduced by a previous administration in the name of making tax compliance easy. No longer is the government talking about "Australian tax being paid on profits made in Australia" which was the mantra before the G-20 summit last September.

Australian Prime Minister Tony Abbott's backdown contrasts with the British decision to introduce "a diverted profits tax" to end MNC tax avoidance schemes from April. The British intend to impose a 25 per cent tax on firms that use "contrived arrangements" to avoid having a tax presence in the UK and route profits to a tax haven. Of course, Britain's Conservative Party government is facing an election in May and Prime Minister David Cameron may have acted because he needs to show that his government is serious about tackling tax avoidance. Mr Abbott, on the other hand, does not need to face the voters until 2017.